Thursday, November 20, 2008

Rate Watch 11/20/08: Float to Lock

Bonds started out better this morning, but worsened, and at 1:00 I issued an alert to Lock Advice. Bonds continue to touch the 200 day moving average for the 13th consecutive day.

HERE is the BIG news of the day! The October Fed Meeting Minutes were released yesterday. The Fed has expressed concern about deflation. The "D" word.

Deflation is when prices drop, mainly due to decreases in money supply and credit. In a deflationary environment, investors flee into fixed instruments, like Bonds. Going back to the Spring of 2003, Alan Greenspan uttered the "D" word. Mortgage Bonds rallied 400 basis points in a couple of weeks, setting off an unprecedented refi-boom.

It will take investors waking up to the bargain value of Mortgage Bonds for the rally to begin. I want to let everyone know that we may be on the verge of the refi Boom which I know you have been waiting for. Things are MUCH different now than they were in 2003, but I am watching this VERY closely!

Prices have barely peaked above the 200 day moving average. And here is a quick reminder about 2003: When Alan Greenspan came back and later said there is NO threat of deflation-the refi-boom ended Qucikly and rates shot up dramatically (1% higher in 4 days-I was there, I lived it, I saw it!). Stay tuned, we are living history again!

Be ready for my call to you to alert you on dramatic drops in rates to take advantage of!

When it happens, we may have a SMALL window of opportunity to take advantage of!

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